Plenty of Knowledge Work to Go Around

Anxiety over outsourcing mounts as the jobs trekking overseas increasingly involve intellectual heavy lifting. Relatively modest knowledge work—back-office support, customer service, and data entry—was followed by more sophisticated tasks such as computer coding, insurance underwriting, claims processing, and medical transcription. Recently, we have been exporting jobs in X-ray diagnostics, software programming, software engineering, and even some research and development. At this rate, won’t most of the cerebral work American companies do be farmed out to lower-cost labor offshore? The short answer: Not a chance. The slightly longer—and even more upbeat—answer is that there is far more knowledge work in the United States today than there was a decade ago. In ten years, we can expect to see more. Some of that work will even come from foreign-based corporations offshoring to the United States. Global companies deciding where to locate consider first where they can tap into the highest level of skill they need at the lowest cost. For that reason, the quality of America’s top research institutions is a huge boon to the nation’s knowledge workers. A mile from my home in Cambridge, Massachusetts, for example, a research and development zone plays host to loads of non-U.S. software and biotech firms eager to absorb some brainpower from Harvard and MIT. I assume those companies are paying a high price for such skills, and they’re worth every penny. At the same time, Siemens, Nokia, and General Electric, among others, are conducting manufacturing-related R&D in China, at a much lower cost. That work doesn’t require a Harvard or an MIT, and it needs to be done close to where it will be implemented—in this case, China’s sprawling manufacturing centers. Yes, proximity to customers matters. And here’s another big advantage for America’s knowledge workers: They live near some of the richest and most sophisticated customers in the world. Furthermore, as more products become low-cost commodities, those customers are demanding—and paying more for—additional customization, special applications, and new designs and ideas. In other words, knowledge work. Because I can trade over the Internet, for example, I no longer rely on a stockbroker. But I do need advice from a financial consultant who knows the market better than I do and understands my risk preferences and financial needs. Searching for profits, IBM progressed from hardware to software to services as each of those offerings in turn became commoditized. Today, the company’s focus is on specialized solutions, consulting, and custom applications—the next points along the sophistication arc. In sum, topflight research communities, and increasingly demanding American customers and their growing appetite for ever more sophisticated products and services, all spell more knowledge work in the United States, not less. Between 1999 and 2003 (the latest year for which we have data), the number of IT-related white-collar jobs in the United States actually increased. IT wages are rising, too (adjusted for inflation and the business cycle). The earnings of college graduates continue to outpace the earnings of those with only high school diplomas; the earnings of people with graduate and professional degrees are rising even faster. If demand for knowledge work were dropping, we’d expect the opposite. This isn’t a brief for complacency. Unless the United States invests large sums in education and in basic research and development—and invests wisely—it won’t have enough knowledge workers to meet future demand. It won’t even have the majority of the world’s richest and most sophisticated customers. Decades from now, China and India may have surpassed the United States in high-value knowledge work. A related challenge is to reverse the slide of Americans without college degrees, most of whom fall into the local service economy, with its low wages and vanishing benefits. The widening earnings gap between this group and America’s knowledge workers undermines social solidarity and threatens democracy. Not every American can become a world-class knowledge worker, of course. But millions more can get the skills they need to be prosperous members of the world’s wealthiest nation.

Plenty of Knowledge Work to Go Around

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